If you’ve outgrown your current home, should you renovate or look for a new house?
Deciding whether to stay or go is always hard. In order to properly make a decision (and not regret your choice), it’s important to 1.) analyze your current situation and 2.) look at the alternatives.
To Stay and Renovate:
Putting your home on the selling block is a big decision. So before you invite strangers to get all up in your space, ask yourself the following questions first: (new paragraph) Can I renovate my house? Would this be enough to make my home livable? Is it possible to make these changes? Can I afford to make these changes? and Will the potential increase in home value outweigh the costs of renovating my house?
Is It Fixable?
The first consideration is how bad is it? How much would you have to change in order to satisfy your needs. Is your lot big enough for an addition? Will your foundation be able to handle the weight of an extra floor? Does the tired look of your home require a major overhaul? Will the renovations add value to your home? After planning out the changes you’d like to make, speak to professional renovators to get quotes for each one.
Are Renovations Possible with Your Lifestyle?
Next, depending on the complexity of the project, you have to decide if it’s worthwhile for you and your family to temporarily live in a construction zone. Renovations could take several weeks or even months, which may not be feasible in your particular situation.
Is It Cost-Efficient?
Finally, you have to weigh your options to determine what makes the most financial sense. Making renovations instead of moving can be affordable, even if you don’t have any extra cash lying around.
By refinancing or using some of your home equity to front the costs, you can renovate your house without breaking the bank. For example, if you take out a home equity line of credit (HELOC), you can access money as needed for each stage of your renovation and only pay interest on the amount you use. This line of credit is then covered by your home equity.
If you’ve grown to love your neighborhood and all the amenities it has to offer, it might be desirable to stay where you are and make your home work for you.
To Sell and Move Away
While it may seem easier to sell your existing home and buy a new one, there are also many costs, including:
- Real Estate Fees—selling your house can cost up to 6% of the home value for a realtor. So, if you sell your house for $250,000, you could end up paying $15,000 in commissions.
- Legal Fees—Depending on the complexity of the transaction, fees can range between $1,000-$2,000.
- Land Transfer Tax—Where applicable, this can be 1-3% of the value of the home you are purchasing. So, if you buy a house for $300,000, this would be approximately $4,000.
- Moving Expenses—This will vary depending on if you hire packers and movers and how much stuff you have to move.
- New Furniture—If you need to furnish a larger space, it could cost thousands of dollars more.
- Mortgage Penalty—Depending on the terms of your lender and your mortgage balance, you could face penalty fees in the range of $1,000 to $10,000!
There are many considerations when deciding whether to sell or renovate your house. After all, the decision between renovating and buying a new house is not just a question of finances, but also one of time, energy, and peace of mind. Each choice has its advantages and disadvantages, and it’s important to review all of them before making a final decision.
It’s also just as important to check your facts and verify that you are looking at the most efficient options. Consult with a mortgage expert today to ensure you make the best decision for yourself!